At least three FIG offerings are expected to price in the US investment-grade primary on Thursday, adding to the burgeoning bank supply already placed this week.
The post-earnings field is expected to see more supply from banks as yearend approaches.
Meanwhile, the high-yield primary is active with an offering from Jane Street.
The economic data menu today has some key releases, including retail sales, the Philadelphia Fed manufacturing outlook and weekly jobless claims.
BMO said in a report following the data that retail sales surprised to the upside, Philly Fed was higher than expected and jobless claims were the second highest since late July.
"On net, it was a bond bearish round of data although it hasn't changed expectations for the Fed to cut by 25bp in November," BMO said.
On Wednesday five IG issues were priced, including two big US banks, totaling US$13.25bn, lifting weekly supply to US$21.25bn and October issuance to US$50.4bn, according to IFR data. The average new issue concession for the offerings was 0.67bp and the average order book was 3.24x subscribed, according to the data. The average move from initial price thoughts to pricing was 24.33bp tighter.
Order books were solid, BMO said, continuing the trend prevalent in recent years of very strong demand for heavily anticipated post-earnings bank issuance.
BMO said that yesterday's supply, including three banks, pushed the weekly total to US$21.25bn compared to expectations for around US$28bn coming into the week.
Yesterday’s IG supply brings the year-to-date total to just over US$1.3trn, already the third largest total on record, BMO said. This year needs an additional US$119bn to pass 2021 to become the largest year of IG supply in history, excluding the extraordinary pandemic year of 2020, BMO said.
In the HY primary, one offering was priced totaling US$1.875bn, pushing weekly volume to US$2.525bn and October issuance to US$11.585bn.
The average IG bond spread was unchanged at 83bp on Wednesday and the HY bond spread edged in by 3bp to 290bp, according to ICE BofA data. The average yields across asset classes were mixed yesterday, the data show.
"High grade spreads closed mostly unchanged during yesterday’s session at multidecade lows, though tone remained decidedly on the firm side with a 0.5bp narrowing in 5yr IG CDX," BMO said.
HIGH GRADE
At least three US investment-grade bond offerings are expected to price on Thursday.
For the second time this year, Royal Bank of Canada is in the market with an offering of limited recourse capital notes, a form of Additional Tier 1 capital note unique to Canadian banks.
The borrower is selling a 60-year non-call 10 note, with leads setting IPTs at 6.625% area. If priced at that level, the deal would be on course to be the lowest yield recorded by a LRCN transaction, according to IFR data.
US Bancorp is issuing bank-level senior unsecured notes, split into three-year non-call two bonds in both fixed-to-floating and floating formats.
The Minnesota-based bank rarely issues opco bonds. US Bancorp last printed an opco transaction in 2021.
Financial services provider State Street is in the market with a three-part senior unsecured bond.
LEVERAGE/HIGH YIELD
Jane Street has the market to itself today as it returns with a US$1bn eight-year non-call three bond. Pricing is expected later today.
The trading firm last issued bonds in April when it sold a US$1.4bn 7.125% 2031 at par.
That bond has since rallied to change hands on Wednesday at a dollar price of 104.75 for a yield of 5.915%, according to MarketAxess data.
STRUCTURED FINANCE
Seven asset-backed securities issuers raised more than US$7bn on Wednesday. The bulk of the volume came from the auto sector, with Honda, Lithia Motors, Bridgecrest, Nissan, First Help Financial and Santander all selling bonds backed by prime or subprime loans.
The other ABS deal was an US$850m offering of five-year bonds from Concord Music. The securities, which are backed by song royalties, printed at US Treasuries plus 185bp, following guidance of 190bp-195bp.
Also yesterday, Equify Financial released guidance on its US$153m equipment ABS deal, with its Triple A rated US$111.7m tranche coming at 130bp-135bp over Treasuries.
LATAM
El Salvador closed a US$1bn loan agreement with JP Morgan yesterday to fund Friday's repurchase of US$1bn of outstanding bonds for US$940m. The US$352m of estimated savings from this debt-for-nature swap will be applied to the Rio Lempa Conservation and Restoration Program over the next 20 years, the DFC said in a press release on Wednesday.
BTG Pactual is expected to price today a long five-year senior unsecured bond. Initial price thoughts are in the low 6% area. Deutsche Bank, BTG Pactual, Citigroup, JP Morgan and Santander are the bookrunners.
Ecopetrol raised US$1.75bn on Wednesday from a seven-year senior unsecured bond. The notes priced at 7.8%. BBVA, JP Morgan and Santander were the bookrunners.
EQUITIES
High-end EV maker Lucid raised nearly US$1.7bn late Wednesday from an overnight public stock offering and private placement with Saudi Arabia sovereign wealth fund Public Investment Fund.
Bank of America was sole bookrunner on the public offering of 262.4m shares at US$2.66, the low end of the $2.66–$2.80 marketing range and a 18.9% discount to Lucid’s US$3.28 closing share price on Wednesday. The bank backstopped the public offering but took the extra precaution of pre-marketing prior to launching the deal publicly.
PIF purchased 374.7m shares at the same price BofA paid on the block purchase of stock sold in the public offering to avoid diluting its hefty 58.8% stake. The new investment is on top of the US$1bn the sovereign wealth fund injected in March via a convertible preferred security, and another US$1.8bn invested in June 2023 alongside a US$1.2bn public offering.
Lucid warned it expects to post a third-quarter operating loss of US$765m–$790m and ended that quarter with about US$4bn of cash, based on preliminary unaudited results. The company delivered 2,781 vehicles, a slight pick-up from the 2,394 vehicles delivered in the second quarter.
The EV maker is scheduled to report third-quarter results on November 7.
In an otherwise light week, Capricor Therapeutics raised US$75m from a stock sale overnight Wednesday to help fund development of its Duchenne muscular dystrophy drug.
Piper Sandler and Oppenheimer Securities priced 4.4m shares at US$17.00, the low end of the US$17.00–$18.00 marketing range and a 17.1% discount to the US$20.51 Wednesday closing price. The banks upsized the offering from US$50m after extensively pre-marketing ahead of broader overnight marketing.
Capricor plans to file for FDA approval later this year on a lead drug to treat DMD patients with accompanying heart problems.